Wharton Pension Research Council Working Papers

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Working Paper

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Most workers in defined contribution retirement plans are inattentive portfolio managers: only a few engage in any trading at all, and only a tiny minority trades actively. Using a rich new dataset on 1.2 million workers in over 1,500 plans, we find that most 401(k) plan participants are characterized by profound inertia. Almost all participants (80%) initiate no trades, and an additional 11% makes only a single trade, in a two-year period. Even among traders, portfolio turnover rates are one-third the rate of professional money managers. Those who trade in their 401(k) plans are more affluent older men, with higher incomes and longer job tenure. They tend to use the internet for 401(k) account access, hold a larger number of investment options, and are more likely to hold active equity funds rather than index or lifecycle funds. Some plan features, including offering own-employer stock, also raise trading levels.

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Copyright/Permission Statement

All findings, interpretations, and conclusions of this paper represent the views of the author(s) and not those of the Wharton School or the Pension Research Council. Copyright 2006 © Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The authors thank Terry Odean, Carol Park, Stella Yang, and Jean Young for helpful comments. They are grateful to Vanguard for the provision of recordkeeping data under restricted access conditions; and to the Pension Research Council at the Wharton School and Vanguard for research support. This research is part of the NBER programs on Aging and Labor Economics. Opinions expressed herein are those of the authors alone, and not those of The Wharton School, Vanguard, or any other institution which whom the authors may be affiliated. ©2006 Mitchell, Mottola, Utkus and Yamaguchi.

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Date Posted: 28 August 2019